CERC draft sets tougher norms for producers

This may bring down power tariff

The Central Electricity Regulatory Commission (CERC), on Tuesday, announced draft tariff criteria for the power sector for 2014-19, which is likely to impact companies such as NTPC, Sutlej Jal Vidyut Nigam and NHPC.

According to this draft, power tariffs will fall as the CERC has proposed to remove the tax arbitrage, which existed when companies such as NTPC charged a higher tax rate from its customers.

The CERC has also changed the norms for operating and maintenance (O&M) expenses marginally, which, according to analysts, is set to increase, bringing in relief for power generation companies.

Another highlight of the draft is the proposed tightening of operating norms for power producing and transmission companies by shifting incentives to their plant load factor (PLF) from the plant available factor (PAF). This will link incentives to actual power generated and the PLF, that is, the capacity at which the plant is operating. While private companies have been given permission to raise tariffs, the proposed change would affect state-run producers such as NTPC, whose existing incentives are linked to their available capacity for the State electricity boards (SEBs).

Thus, even if the NTPC’s plants could not generate the required power for lack of coal, it is still able to avail itself of the benefits. PLFs of most power generators have fallen below 70 per cent in recent times owing to coal availability issues. The final regulations will be prepared in early 2014, after getting the relevant industry feedback. There is a public hearing on January 15, 2014. The new power tariffs will be applicable from April.

Immediately after the draft norms were released, NTPC stocks took a beating. It closed 11.26 per cent lower at Rs.136 on the BSE.

In a statement here, NTPC said, “the draft CERC regulations have just come in the public domain, and we are studying the same. Prima facia, we find positive changes. This paper is under discussion, and we are going through with a fine comb before it is finalised. We expect the regulator, which is a statutory body to encourage development of the power sector, will not dis-incentivise or de-motivate the largest power generating company in the country.’’

“The company would like to assure our investors of continued returns, and thank them for their support. NTPC generates 27 per cent of electricity in the country with 18 per cent of the installed capacity. We have been rated as number one company in the world in terms of capacity utilisation, and the revenue that we earn is because of our efficiency, our experience and our strength of specialised manpower and our corporate and financial management. Very stringent regulatory norms will further deteriorate the financial health of the state sector generators,’’ the statement adds.